Qantas Airways Limited is an Australian based organization that provides passenger and freight air transportation services both local and in the international arena. It is a world-class career that is among the oldest airfreight providers in Australia. Qantas has pioneered services across different places such as Europe and North America. Empirical reports show that the organization operates in more than 44 countries across the globe and has more than 32,500 employees. Besides, the organization also provides travel, holiday tours, catering, engineering and maintenance services in addition to express ground handling and cargo services to its clients. Moreover, Qantas Airways offers logistics services which entail courier and interstate trucking services in the air cargo industry. The company, founded in 1920 with headquarters in Mascot, Australia, currently operates nearly more than 303 aircraft. The primary business segments of the airline include Qantas International, Domestic, Freight, Qantas Loyalty, Jetstar Group and Corporate. The resent financial reports revealed that the airline an underlying profit before tax of $976 million. This is an improvement from the previous year’s performance by nearly 15% growth in profit margin.
Organization Structure
The management hierarchy at Qantas airlines is divided into three distinct categories; top, secondary and ground levels respectively.
Top level
The structures of Multinational Corporations have an exclusive system of divisional functioning in their hierarchies. Similarly, Qantas has a similar structure. Board of directors are at the top; comprising of more than eight members with the president as the head. The board heads various committees that carry out many activities at the organization’s apex. These activities include audit, security health, remunerations and nominations among others. The formal separation of management of Qantas Domestic and Qantas International has assisted in ensuring independence in running each business segment in a manner that makes it easier to understand and respond to the market conditions and business priorities. The separation is also a significant part of promoting division of labor and specialization. Both of the two divisions need different chief executive officers. Besides, the organization ensures maintenance of high levels of operational efficiency through the installation of non-executive directors on the boards.
Secondary level
Business executive teams are at the apex of this level. They formulate plans and strategies for implementing the implementation of the policies formulated by the board of directors at the top level of the organization. Besides being the link between the top level managers and the ground people, middle-level officers are charged with easing technical operations that are essential for proper functioning of the airline. The middle level has twelve divisions, which include IT and technology, human resources, legal affairs, Jetstar, finances, loyalty, domestic and other departmental heads within the section. These sections are headed by professionally qualified managers whose mandate is to carry out all activities and tasks that require adequate skill development and the activities that cannot be naturally be undertaken by employees at the ground level.
Ground Level
Ground level is the lowest level within the Qantas organization’s structure. It comprises employees working at lower levels in the planes, airports and runways among others. However, it is critical to recognize that an airline can only operate efficiently when its employees at the ground level can work hard with due diligence.
The organization complies with all the available regulations and laws besides performing its businesses in an ethical manner and integrity. Industry reports have consistently revealed that Qantas airlines limited has an incredible framework of governance, which is critical in creating, protecting and enhancing shareholders’ value. Thus, it remains one of the most effective airline carriers both domestically and internationally with the support of highly qualified managers within well-motivated employees across all the ranks of organization’s hierarchy.
Mega Environmental Analysis
PESTLE analysis is a critical tool for analyzing the organization’s external environment. It assists in evaluating the influence of external environment on the performance of the organization.
Political factors
These primarily comprise of the factors related to the governmental influence on the operations and performance of Qantas airlines limited. Analysis of various political factors shows that various actions undertaken by the government influence across different regions in the world. For instance, political strife and instability in the Middle Eastern region is a major challenge that affects the performance of Qantas airlines limited. The organization also failed to generate adequate revenue due to the political unrests that characterized Bangkok, Thailand. Thus, the political perspective provides that for the efficiency of operations, generation of maximum revenue, prosperity and progress, Qantas needs a stable and positive attitude of national leaders of the countries in which it operates.
Economic Factors
Empirical studies show that performance of a business heavily relies on the prevailing economic circumstances. These comprise various systems involved in the production, distribution and wealth consumption. For example, market forces are key determinant within capitalist societies, where means of productions are owned by private sectors. However, this widely varies from the capitalist societies where the state owns and formulates plans that coordinate and control means of production. As a result, economic factors posit critical implications to the performance and success of Qantas airlines in various senses. For instance, the organization’s performance efficiency regarding revenue generation has adversely been influenced by declining economic performance of the national economy of Australia. Over the recent periods, the Australian economy has been experiencing recessions, which have negatively influenced the people’s per capita income, thus resulting in lower demands for the organization’s services. The consistent decline of the company’s revenues is a testimony to the lower demands for air tickets due to the poor performance of the economy. These economic conditions have adversely affected the performance and operations of the company, leading to sustained losses over periods as well as dwindling revenues.
Social factors
These comprise behaviors, customs, societal values, norms and beliefs. Social factors by their very nature are fluid thus requiring organizations to be able to adopt their business practices according to the changes in the society’s expectations. Similarly, social trends and conditions characterize and influence the performance of airline industry across the globe; thus effecting the operations and practices of Qantas airlines limited to a considerable degree. A critical analysis of the airline industry reveals that social trends have a significant influence on the airline business. For instance, the latest research shows that people often prefer using low-cost carriers. This is a significant phenomenon with critical ramifications to carriers such as Qantas airlines that primarily provides its clients with premium class services.
Technological Factors
The emergence of technology has had a crucial influence on business operations and practices across industries. They can influence the performance of business either in a positive or negative way. Some of the areas that have been greatly affected by technological evolution include telecommunication, automobile and computers among others. Within the airline industry, technological has taken over processes such as airline ticket bookings that have become digitized. Qantas airline has been apt in adopting technological changes which have critically assisted it to remain relevant in the industry. In fact, Qantas airline was the first carrier to apply satellite technology to perform the landing. Overall, the performance and success of companies such as Qantas airlines majorly rely on the technology; thus, for the organization to stay ahead of the competition, it must focus on consistently adopt current technological developments.
Legal Factors
These factors also pose a significant influence on Qantas airlines in many ways. For instance, the organization is required to pay the carbon tax, which is the legal formality that it must fulfil as an airline operator to be able to perform its services. Besides, there are also various laws and regulations that govern airline operations; thus affecting Qantas airlines.
Environmental Factors
Environmental factors pose significant influence on the airline industry in various senses. For instance, the airline industry authorities and regulatory board have well stipulated and structured regulations for handling environmental ineffectiveness among airline operators. Qantas airline aims to achieve reductions in CO2 emissions to half by 2050. According to a research carried out in 2012 by Coorey and O’Sullivan, nearly 95% of the current carbon emissions by the company originated from its flying operations.
PORTER’s Five Forces Analysis
It affects the operations and performance of airline carriers particularly Qantas airlines in various ways as discussed below.
Competitive Rivalry
The airline industry is experiencing a considerable competitive rivalry. These have been characterized by subsidiaries, mergers and acquisitions. The organization established Jetstar as a low-cost carrier that targets customers within the lower market segment in 2003, which culminated in the creation of two-brand strategy. The establishment of the two brands was a strategy for the company to be able to access various market opportunities through the deployment of better superior products for each market segment thus enhancing the organization’s competitive strategy. However, since the establishment of the low-cost carrier, other airline operators such as British Airways and Singapore Airlines also followed the step thus presenting considerable threat by providing even lower cost and superior customer service. Besides, Qantas has also been experiencing significant competition in the Australian market from its rival, Virgin Airline. Latest reports show that the competition between these two firms is quite severe to the extent that their operations often attract higher losses.
Threat of New Entrants
The huge initial investment requirements in the airline industry have ensured low entry by new firms. The situation becomes worse considering the fact that new entrants will unlikely not perform better. As a result, the airline industry has stringent entry barriers. The price wars between the existing companies make the industry unattractive for new entrants. Besides, potential new entrants face the challenge of availability of landing slots within airports in Australia. Established airline operators already reserved the available slots. Thus, new entrants are not likely to obtain such slots especially in airports with huge passenger demand.
Threat of substitutes
The airline industry has numerous substitutes such as trains, cars and cruise ships which are cheaper compared to flights. Nonetheless, when it comes to time and speed, air travel has an absolute advantage; thus reducing the threat of substitute.
Suppliers Bargaining Power
Large airlines such as Qantas majorly rely on Airbus and Boeing as their major suppliers. A report released by Qantas in 2014 revealed that the company was planning to spend nearly $17 billion worth of capital investments to acquire next-generation aircraft that are fuel efficient. Further, due to the high dependence of the company on the prevailing oil prices to make profits, oil suppliers, therefore, have huge bargaining power. Besides, hedging of prices is quite limited and significant rise in prices is likely to manipulate the cost of fuel for the company. Therefore, suppliers have significant bargaining power in the airline industry.
Buyers’ Bargaining Power
The price based preference that characterizes the operations of Qantas provides consumers with tremendous bargaining power. Since most airlines provide similar services, consumers will often select the service provider that provides value for their money. The availability of information technology tools makes it easier for consumers to compare prices and flight services before finally selecting a particular carrier. The buyers’ bargaining power even increases due to the low switching costs that characterize airline industry.
Organization’s Culture
Qantas airline should instil in their employees the spirit of a worrier, a fun-long attitude and a servant’s heart. They must remind their employees about appreciating their customers each day. The stuff must consider customer service as their primary role. This will enable customers to continue to prefer using Qantas airlines as their best choice. The stuff must consider greeting the clients with a smile at each step from the point of booking through the point of exit. Through the worrier spirit, the organization must equip the employees with tools necessary for handling any situation. Being fun-loving ensures that the stuff does not become too serious and a servant heart will assist the employees to provide more than the customers paid for. When hiring new employees, Qantas airlines should ensure that they embed these values and make it run across the organization. Inculcating this culture to the organization will be critical to the success and prosperity of Qantas airlines.
Goals, Plans and Strategies
The 2009 Qantas annual report reveals a critical vision for Jetstar and Qantas Airline; “The World’s Best Low Fare Carrier” and “The World’s Best Premium Airline.” In the bid to achieve the organization’s vision and mission, Qantas airlines recognize its employees as critical in driving its five significant strategies, which include;
- Safety – strengthening the safety management structure within Qantas, installing processes and efforts that aim at improving safety consciousness across the organization and constantly reviewing safety manuals and procedures to ensure that they meet standards.
- Right aircraft right routes
- Customer Service Excellence
- Operational efficiency
- Two strong brands (complementary)
Differentiation Strategy
Qantas premium brand matches differentiation strategy concerning porter’s model of three generic strategies. The premium price offers Qantas customers with a value that make them feel superior. According to a sustainability report published in 2008, Qantas emerged as the leader regarding safety and security in its industry. The organization operates more than 330000 flights annually and thus it is hard to escape incidents that often arise. Therefore, this provides Qantas with confidence in its world-class safety programs and systems that provide it with an edge over its rivals. Besides, Qantas offers in-flight entertainment with full-options with all of its international carriers about customer service. Moreover, the company has club lounges fully equipped with all essential facilities in all its destinations across the globe. Qantas also operates a group route network that operates in more than 173 destinations in conjunction with partner airways. Therefore, all these activities make Qantas Airline conspicuous to customers and enhancing its products’ value.
Cost leadership strategy
This strategy is applicable by Jetstar which focuses on low-cost consumer segment to enable the carrier to establish itself in a different sphere. The fact that most airlines are currently focusing on low-cost customer segment makes it ideal for Qantas through Jetstar to attract more customers. Jetstar airline focuses on reaching the lowest price in comparison to other airlines; thus, the company is identifying critical strategies such as partnering to tame the major competitors.
Challenge
The aviation industry is perhaps the most global of all. Therefore, whenever a foreign airline lands in Australia, it imports work practices and labor costs. The major challenge facing Qantas Airline at the current period is the emergence and establishment of Virgin Airline, with significant productivity levels and lower labor costs into the Australian market where Qantas has been enjoying monopoly status for a considerable period. While Qantas Airline is struggling to attract the interest of investors, Virgin enjoys strong financial backing from international business persons and organizations.
However, it is important that Qantas has a considerable advantage over Virgin. It is the national carrier of Australia, thus is an iconic symbol of Australia’s aviation history. The government must, therefore, realize that the company’s grievances are legitimate. Although the Australian government does not own any stakes in the company, it cannot restructure and access foreign capital markets unlike Virgin Airline, a condition imposed on the company by the Qantas Sale Act.
Nevertheless, these reforms must be far-reaching to affect other segments that affect airline industry. Australia is characterized by numerous restrictions that are out of date. The Air Navigation Act, for instance, restricts international air competition within the local Australian carriers. As a result, the act restricts ownership of international Australian airlines. Therefore, the government must consider adopting open skies policy to replace these restrictions that date back to the 1920s to enable the international carriers to operate in Australia. The government must remove ownership restrictions that are a characteristic of Australian international airlines.
Conclusion
Qantas Airlines is Australia’s national carrier with the largest international flights, fleet size and international destinations. The organization also has various subsidiaries that service regional centres and some truck routes across Australia under its umbrella. Qantas Airline also owns Jetstar Airways, which serves the low-cost consumer segment both within and outside Australia.
Qantas Airways is a private limited company which is limited by the Qantas Sale Act to foreign ownership of up to 49%. The Act further restricts foreign airlines.
The intense competition, high fuel prices and industrial disputes have negatively affected the company’s profitability, leading to the full-year loss of $245 million in 2012. Over the years, Qantas Airlines has been focusing on partnerships as a strategy to reduce operational costs, generate additional revenue and acquire access to various markets across the globe. The carrier has numerous destinations in Africa, North America, Europe, Asia and Oceania. However, despite the considerable changes that have boosted the performance, competition remains the major challenge affecting the operations of Qantas Airways.
